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Tax-Exempt Status Could Hinge On Filing Deadline

More than 200,000 small charities and nonprofits could lose their tax-exempt status next week if they don't file a federal tax form by Monday. But many groups could be unaware that they're even supposed to file the form.

The requirement goes back to a 2006 law that says nonprofits with revenues of $25,000 or less have to start filing annual tax forms -- something they never had to do before. The law also says that if they fail to do so for three years in a row, their tax-exempt status will be immediately revoked.

Since nonprofits have to file no later than four months and 15 days after the end of their fiscal year, the three-year deadline for many groups is May 17 (May 15 falls on a Saturday).

Tim Delaney, head of the National Council of Nonprofits, is worried that a lot of tax-exempt groups will miss the deadline. He notes that some of these organizations are run informally by volunteers.

"The concern that a lot of people have is that many smaller nonprofits -- a PTA, a local Little League -- will even be aware of this change in the law," he says.

The National Council of Nonprofits, the IRS and others have been trying to get the word out to hundreds of thousands of charities and nonprofits listed in government files. The Urban Institute's National Center for Charitable Statistics has even set up a website that anyone can check to see if a specific group is in danger of losing its tax-exempt status.

It's unclear how many active nonprofits will be affected by the change. Experts say many groups might not be filing tax forms because they've gone out of existence but failed to notify the government. In fact, one reason for the new requirement is to help the IRS get a better idea of just how many nonprofits there are in the U.S., something no one really knows for sure.

Charities that fail to meet the deadline can always reapply for tax-exempt status. But Delaney says it's a lot easier to fill out the tax form now, "to basically send a flare up to the IRS -- yes, we still exist, we're still functioning, this is how you can reach us -- and it's pretty much as simple as that." The form, called a 990-N, has only eight questions about a nonprofit's status and contact information.

The good news for donors: The IRS says that even if a group's tax exemption is revoked, donors can still deduct any contributions they make to the group until an official revocation notice is posted early next year.